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How much do I need to prepare to retire?
For most people, this issue comes after more important matters such as food expenses, rent payment, mortgages or student loans.But this issue may be more complicated than you think-a series of factors show that our vision of old age does not match the reality of living on a fixed income.
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Expect too much
The retirement problem faced by Americans is a good example.
Among American baby boomers,Less than half have retirement funds of more than $10.However, it is estimated that the average couple spends as much as $28 on health care after retirement.A report by Merrill Lynch stated thatOne in five Americans does not know how much money they need for their retirement, and most people are short of savings by nearly 20%.
Another report reflects a misunderstanding of retirement.Close to2/3 of American baby boomersBelieveThey can live a comfortable life after retirement, But only slightly more than three-thirds believe that they have enough savings.Nearly half of the respondentsthink, Their standard of living will remain unchanged after retirement.
however,The situation reflected by these data is different from people’s perception, and the culprit is a series of wrong ideas..
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"I would have known it long ago"
One of the reasons why we did not save enough money to retire is: as we get older,Our ability to make moneyThere is a misunderstanding.In the United States, women usually reach the peak of their earning power at the age of 39, while men’s wages continue to climb into the late 40s.
Although small salary increases may still occur in the coming years, the pace of inflation and changes in lifestyle (our consumption levels increase when we earn additional income) will gradually offset this small salary increase.
The extra income means that leisure and entertainment in life are becoming more expensive. The pace of inflation and the slow change of life style go hand in hand, which is dangerous for retirees. (Credit: Unsplash)
Experience tells people,Save 15% of your annual income for retirement.But half of Americans cannot save so much, and some even save zero.
Under the effect of compound interest, if we start saving as soon as possible, it will be easier to obtain higher returns-if we start late, even if we save more money later.American Financial Services CorporationNorthwest Reciprocity(Northwestern mutualAccording to a survey by ),1/3 of baby boomersThe deposit is 2.5 US dollars, Or less.
Outside the United States, other countries may have more savings, but they may still face unforeseen problems.
For example, Germans are generally more cautious savers: they support retirees by allowing working nationals to contribute to the national savings plan.However, the aging society has had a certain impact: the retirement age continues to be postponed, and most Germans still need to save four times their annual income to ensure a comfortable retirement life.
Most people save cash instead of investing and cannot benefit from the stock market, which aggravates the severity of the problem.Very few people think they have enough money to invest in the market, or think that cash savings are safer than investment.
Very few people think they have enough money to invest in the market, or think that cash savings is safer than investment (Credit: Unsplash)
Peter Chadborn, director of Plan Money financial consulting firm in the UK, said,Most people's wrong way of saving stems from the lack of financial education.For example, he has many customers who do not know that they need more money to earn the same income after retirement.
"Whenever people know about this, they will say:'If someone explained this to me 10 or 20 years ago, then I can get early warning and make a different decision.Now I am at the point of retirement and it is too late to do anything."
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"Non Windfall"
In the UK, although the legal age for receiving pensions is 65, nationals aged 55 and above can withdraw their pensions at one time and spend or invest in accordance with their own wishes.
Experts say that many people miss an opportunity when withdrawing money for the first time: Most people prefer cash or bank deposits that can be withdrawn quickly.Very few people put money intopensionSuch as long-term investment that can grow funds.
The British government manages the publicpension'S institution, Is trying to persuade retirees to manage their funds in a reasonable way, instead of storing a sum of cash at home for emergency needs, or hiding the money under the mattress.Even the most prudent investment can offset the impact of inflation of around 4% per year.
butMany decisions made by retirees are driven by fear, Said Teresa Fritz, policy manager at Money Advice Service.
She explained: "Some people withdraw their money because they don’t believe in the pension industry.They worry that if they don't withdraw it now, the money will be gone in a few years.This is not due to a failure in investment, but a policy change, or the pension company has closed down, preventing them from getting the money. "
"They treat their pension savings as a windfall. This idea is dangerous because pensions are not windfalls. They should run through your old age."
Wealth Consulting Services believes thatMost retirees often underestimate the length of their retirement。僅僅規劃20年的退休期可能意味着最後會花光所有錢——特別是65歲的男性和女性都有50%的機會分別活到87歲和90歲。
Worse still, due to the highEnd-of-life care costs.Many people may spend more in their later years.Chadburn of Plan Wealth said: "People are not paying attention to the growth of lifespan. If we need nursing services, it may be at least six months."
Ask a knowledgeable person
Even if you get older and your salary increases, saving will not become easier.As we age, spending large amounts of money may deviate from the original plan for retirement goals.When the retirement period approaches, financial decisions will play a more decisive role.
Although the cost of health care after retirement is as high as US$25 per person, less than half of American baby boomers have more than US$10 in retirement funds (Credit: unsplash)
"You have such a savings to make a decision. If you make a wrong decision, no one can guarantee that you can live the rest of your life on the state pension."
People know how to save money and budget with a fixed income, but few know how to invest wisely—and most people start investing very late.
Chadburn said: "There has been a decline in the financial consulting industry in history. People consulted wealth advisers and I needed to save for retirement, and then the advisers told them to save as much money as possible in the pension. But. This is only half the work."
When the economy is uncertain,The best pension plan is prudent preparation and realistic expectations.Once you know how to guarantee basic expenses, you can decide when it is reasonable to make long-distance travel or relaxation plans.Chadburn gave the following suggestions:
"I suggest that people divide their spending needs into two categories: the first category is basic living expenses, which must be paid with a fixed income. After the first category is guaranteed, you can only consider the second category-leisure and entertainment expenses: how often do you want to eat out? , How many cars do you want to own and how often do you want to go on vacation. This can be supported by floating income, because in addition to inflation, your expenses after retirement will become relatively fixed."
Those who face insufficient income after retirement are more difficult to make decisions.In most cases, this means that they have to reduce the housing area or readjust their expectations for life.
The wisest decision is to seek financial help early and consult frequently, Fritz said.
"When there is a problem with your health, you will not hesitate to contact a doctor. In fact, when there is a problem with your financial health, you also need to seek help."
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(After the full text, this article is from the BBC Capital UK station, clickVisit original text）
